Prepaid Billing, Anyone?

With more and more businesses transitioning from one-off sales and simple subscriptions into usage-based billing, there are any number of models to choose from in an effort to grow revenue, entice new customers, and encourage long-term relationships with existing customers. However, there’s one in particular that’s gaining ground in a surprising variety of industries: prepaid billing.

What Is Prepaid Billing?

Prepaid — or stored value — models allow customers to “preload” their accounts with a certain dollar amount, then draw from that amount as they use products or services. Once it dwindles down toward zero, the customer has an opportunity to “reload.” The most familiar examples of this model are likely your Starbucks card and your public transportation passes — you’ve added a certain amount of money to each of those accounts, and you draw from that amount with every pumpkin spice latte or every train ride until it’s time to pay up again. Other examples include gift certificates, prepaid phone cards, or the opportunity to pay upfront for several hours of services from a vendor.

The Benefits of Prepaid Billing

These models are attractive to both businesses and customers that are looking for a little more stability in their finances.

For Businesses

Prepaid billing reduces the risk of customer churn and bring more stability and predictability to revenue — a much-needed benefit highlighted by the economic turmoil surrounding the pandemic. As a bonus, prepaid models can be used in combination with any number of existing pricing models — with the distinction that, whether customers are taking advantage of tiers and tapers, time-based pricing, or shared models to purchase their goods and services, they’ve handed over the money in advance.

Additionally, prepaid subscriptions lead to a significant increase in customer value, as customers who prepay for their subscriptions are liable to commit to a longer-term engagement — and to reload at the end of it. Cratejoy, a subscription box company, claims prepaid plans increase customer value by a whopping 94 percent.

For Customers

Customers are seeing the same financial instability as businesses are, and they want to be able to strategically plan their cash flow, as well. Prepaid models empower them to manage their cashflow by locking in pricing, planning their expenses, and paying for higher volumes of goods and services when they have the cash to spare so they can be assured they’ll have what they need in leaner months. Additionally, prepaying just takes away a layer of complication from customers’ busy lives — from tapping your pass at the train station or scanning your Starbucks app rather than fumbling for payment, to having one less bill to pay each month because you’ve prepaid for a year’s worth of services.

Is Prepaid Billing an Option for My Business?

If your business doesn’t thrive on one-off purchases (like train fares or coffees), it might be tempting to look at examples like public transit or Starbucks and think prepaid billing isn’t for you. That couldn’t be farther from the truth. Customers can take advantage of prepaid billing in industries ranging from telecommunications to health insurance to any number of products and services.

Consider a business that relies on monthly subscriptions. Whether customers are subscribing to product shipments or software access, allowing them to prepay for a quarter or a year (or more) at a time is a powerful way to encourage commitment and add some stability to your revenue — and your customers’ expenses.

Or one that offers hourly services. For businesses that sell consultations or services by the hour, encouraging customers to pay upfront for 10 or 20 or 50 hours encourages more use and eliminates significant billing headaches for both of you.

At Gotransverse, we pride ourselves on helping our customers — in a wide range of industries — implement revenue-building billing models, including prepaid billing and countless others. To learn whether our platform and the models it supports are right for your business we invite you to take a virtual tour of our billing platform today. Then, when you’re ready, request a demo to learn more.